In a bid to improve internet connectivity in Ghana, Vantage Capital, Africa’s leading mezzanine debt provider, today announced that the DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH (“DEG”) and four other European investors are contributing a total of approximately $60m to Vantage’s third fund.
Mezzanine is an intermediate form of risk capital, which is positioned between senior debt, the least risky tranche of the capital structure, and equity, the most risky. It has the elements of both debt and equity thereby providing companies with long-term funding on terms which are less dilutive to shareholders than pure equity.
DEG’s commitment to Fund III is $20m. In addition the DEG is providing $15m to a co-investment with Vantage in Surfline Communications, the leading 4G LTE network operator in Ghana. Vantage invested $15m in Surfline from its second fund late last year.
The funds committed by DEG to Surfline will be used for the on-going expansion of the company’s 4G LTE network in Ghana as well as to enhance its product distribution and marketing capabilities.
By deploying the first 4G LTE mobile network in Ghana, Surfline is able to offer high-speed internet connectivity (up to 10 times faster than the average speeds offered by the existing mobile network operators) at pricing that is competitive with existing internet service providers. The network achieved an extremely successful commercial launch in August 2014 and is experiencing tremendous growth in its customer base. Surfline was recently nominated for “Breakthrough LTE Entrant” at AfricaCom in South Africa and won “Top Emerging Brand” at the Top Brands Awards in Ghana. The investment in Surfline by Vantage and DEG was nominated by Dealmakers Magazine for “Private Equity Catalyst Deal of the Year.”
Colin Rezek, Managing Partner at Vantage, said “We are extremely pleased to receive the strong endorsement of DEG for our third mezzanine fund, which will employ a pan-African investment approach to focus on high-growth markets such as Ghana, Nigeria, the East African Community members and some of the Southern African Development Community (SADC) countries. We also welcome DEG as a co-investor in Surfline, one of the most exciting deals out of the over 600 investment opportunities we have reviewed in the past five years.”
DEG joins other investors that have already committed funds to Vantage, including a major South African pension fund and foreign investors such as the Swiss Investment Fund for Emerging Markets (“SIFEM”) which is advised by Obviam. Obviam’s Chief Investment Officer, Andrea Heinzer stated: “Based on Vantage’s robust and positive track record in South Africa, we see Vantage Capital as the ideal partner for SIFEM to develop the mezzanine asset class in Sub-Saharan Africa.”
Vantage has made 12 investments in its second mezzanine fund, of which about 90% of available funds have been invested. More than half of the capital deployed has gone into growth projects such as Surfline. Vantage is targeting a final close of its third mezzanine fund at approximately $250 million later in the year.